The consumers later learned – perhaps after consulting with their nutritionists or their legal counsel – that the products were high in added sugar and that the consumption of too much added sugar may not be good for you. They then sued Dole alleging, among other things, that Dole had broken its promise and that the company’s claims amounted to false advertising. In response, Dole argued that its claims were mere puffery. The court’s analysis is instructive in drawing the line between the two.

In order to establish a claim for false advertising in California, a plaintiff must generally show that it’s “probable that a significant portion of the general consuming public or of targeted consumers, acting reasonably in the circumstances, could be misled.” Here, the court found that reasonable consumers wouldn’t rely on the “good nutrition” statements in the context of the labels. The court noted, for example, that the statements appeared in conjunction with claims that the products were “full of sunshine” and that you could “bring sunshine with you wherever you go.”

“To state the obvious,” the court wrote, “the Products are not literally ‘full of sunshine,’ and no consumer can ‘bring sunshine’ with them ‘wherever’ they go – whether by purchasing one of the Products or doing something else.” (The judge has obviously not met our podcast narrator, but his larger point is well-taken.) Because the “conceivably health-related phrases” were combined with fanciful language and drawings, reasonable consumers would not take them seriously.

The court also noted that the challenged claims appeared “immediately adjacent to the Nutrition Facts panel showing the amount of both naturally occurring and added sugar,” and, thus, that no reasonable consumer “would assume that the Product is generally healthy or would not increase the risk of any disease.” (Click here for another example of a recent case in which a court determined that a list of ingredients would prevent reasonable consumers from being misled by a claim on a label.)

This decision is good news for food companies and other advertisers who use colorful language. Remember, though, that defining puffery is, in the words of NAD, “more of an art than a science” and that there are some surprising decisions out there. (Here is one.) We’ll keep monitoring these cases, so check back with us for new developments. As always, we promise to provide everyone, everywhere with good information and a ray of sunshine.

Last year, for example, a California federal court ruled on a case in which a plaintiff claimed that the term “fruit naturals” on the front of fruit cups made by Del Monte Foods misled her into thinking that the products “contained only natural ingredients,” when that wasn’t the case. Del Monte argued that reasonable consumers wouldn’t be misled because the back of the cups clearly discloses that they include ingredients like citric acid, potassium sorbate, and sodium benzoate.

The court held that the term “fruit naturals” does not “make any affirmative promise about what proportion of the ingredients are natural” and was, therefore, ambiguous. The court found that “such ambiguity can be resolved by reference to the back label, which clearly discloses the inclusion of multiple synthetic ingredients.” Moreover, the use of “general knowledge and common sense” would lead consumers to understand that the product included some synthetic ingredients.

In contrast, consider a case that NAD initiated involving claims on the front of Quilted Northern packages advertising that the toilet paper was made “sustainably.” Because that term is ambiguous, NAD considered whether the advertiser had effectively qualified it. In that case, the advertiser included an explanation on the front of the package. NAD didn’t think that was sufficient, though, because the claim appeared at the top, the explanation appeared at the bottom, and there were a lot of other things in between. Similarly disclosures on the back of the package couldn’t cure the issue NAD found on the front.

What would the FTC think? Odds are they’d be closer to NAD’s position. We’ve already seen that in some contexts – such as the revised Endorsement Guides – the FTC has taken stricter positions on what is necessary for a disclosure to be clear and conspicuous, often insisting that it must be “unavoidable.” And when the FTC announced in 2022 that it was seeking input on ways to modernize its .com Disclosure Guidelines, the tone of the press release suggested that more stringent requirements were on the way.

What does this mean for you? It depends what side of the argument you’re on. If you’re an advertiser facing a class action lawsuit over claims on your packages, a growing number of cases suggest you should be able to rely on disclosures that appear on those packages. However, if you are looking to challenge a competitor over claims on its packages, a growing number of cases suggests that NAD may be a friendly forum for you to bring your challenge.

Sephora sells a line of ​“clean” products under its ​“Clean At Sephora” line. The company explains that those products are “formulated without phthalates, formaldehyde or formaldehyde releasers, oxybenzone and octinoxate, and more.” In some places, the company also links to a more detailed list of ingredients that are not included in the products.

As we posted last year, a consumer filed a purported class action against Sephora, alleging that although Sephora advertise the products as being “clean,” they “contain ingredients inconsistent with how consumers understand” that word. The complaint provides a list allegedly synthetic and potentially harmful ingredients that are included in the products.

At the time, we noted that this case is a litmus test for the ​“reasonable consumer” standard. Given that Sephora clearly disclosed what it meant by “clean,” it wouldn’t be reasonable for consumers to assume that it means anything else. Luckily, the court gave reasonable consumers some credit and determined that they wouldn’t be misled by Sephora’s explanations.

The complaint left the court “guessing as to how a reasonable consumer could mistake” the company’s claims and “believe that the cosmetics contain no synthetic or harmful ingredients whatsoever.” Sephora explained that products were formulated without specific ingredients. The court noted that “nowhere on the label or in the marketing materials plaintiff cites does defendant make any claim that the products are free of all synthetic or harmful ingredients.”

From a false advertising perspective, it doesn’t matter that the plaintiff provided “a laundry list of synthetic ingredients found in ‘Clean at Sephora’ cosmetics that she claims have been known to cause irritation or other human harm.” To determine whether or not Sephora’s claims are false, it’s necessary only to consider whether the products included any of the ingredients that Sephora claimed the products did not contain. Because that wasn’t the case, the court dismissed the false advertising claim.

This analysis is similar to the one we discussed in last week’s NAD case, though NAD added the additional caveat that the list of excluded products should “reflect the ingredients banned that are typically used in cosmetics products.” As the law in this area evolves, these two decisions should help to provide a helpful framework for companies that make “clean” claims.

The framework may also be helpful for companies that make other claims using broad terms – such as “sustainable” – that don’t have established definitions. Advertisers should provide a clear and reasonable explanation of what they mean by those terms. Challengers may disagree with the definitions, but advertisers may argue that reasonable consumers won’t be misled as long as the advertisers meet the definitions.

Such was the experience of a woman who purchased a ticket to the Museum of Sex in New York City. She was tantalized by the price of a ticket starting at $36. She clicked through the purchase flow, avoiding the temptations of add-ons such as Love High Sex Gummies (and other items we won’t mention here), and arrived with bated breath at the checkout page, where the climax was ruined by the presence of a $4 service charge, buried under the covers of “Taxes & Fees.”

We’ve all been there (or somewhere like it). An encounter that starts off with promise and excitement ends up in disappointment and dashed expectations. Our woman didn’t take this lying down, though – she filed a lawsuit against the Museum alleging that the act of teasing her with the false promise of a low price violates New York’s Arts & Cultural Affairs Law.

That law states that entertainment venues and ticket sellers must clearly disclose the total cost of a ticket, including any fees, as well as the portion of the ticket price that represents fees. “Such disclosure of the total cost and fees shall be displayed in the ticket listing prior to the ticket being selected for purchase” and, except for reasonable delivery fees, “the price of the ticket shall not increase during the purchase process.”

This case is part of a larger trend of lawsuits and regulatory investigations involving “dark patterns” and “hidden fees.” While we recognize that different people are turned on by different things, we’re fairly confident that no one finds hidden fees to be sexy. We encourage you to look through your purchase flow to ensure you’re revealing all of goods – or bads, as the case may be – up front. When it comes to prices, you don’t want to leave anything to the imagination.

In its motion to dismiss the complaint that “carbon neutral” is misleading, Danone argued that no reasonable consumer would understand “carbon neutral” to mean the product emits no carbon dioxide during its lifecycle. How else could the product be transported from the French Alps to the United States without expending carbon dioxide in the process? Danone argued that consumers would not be misled because the “carbon neutral” claim is defined by the adjacent “Carbon Trust Certified” logo, the reference to the evian website to “Learn More about the Carbon Trust certification,” and the company’s use of the PAS 2060 standard for evaluation.

The judge did not agree, saying “carbon neutral” is a technical term that may mean a number of different things depending on the context. The judge agreed with plaintiff that it is akin to an unqualified general environmental benefit claim, which the FTC’s Green Guides warn advertisers not to make.

Danone argued the notion of adding a lengthy explanation on the label of what carbon neutrality means and the underlying data is not just unreasonable, it is not legally required. But the judge did not agree, saying that the steps consumers would need to take to visit two webpages to understand the meaning of “carbon neutral” and the Carbon Trust standards and certification process amounts to too much research.

The judge did not specifically address the plaintiff’s allegations that the “carbon offsetting market is awash with challenges, fuzzy math and tough-to-prove claims with a long history of overpromising and under delivering.” Delta was sued last year based on a similar challenge to the carbon offset market (see here).

This order raises a number of questions about how much information companies should be including on the product label, and if directing consumers to websites for important information is acceptable. The order also raises questions about the carbon offset market and whether claims based on carbon offsets will be permissible support for carbon reduction claims. We’ll continue to monitor this case as it develops.

• Regulators’ Favorite Shade – Dark Patterns: Following the FTC’s 2022 Dark Patterns Report and high profile enforcement action against Epic Games, regulators including the FTC, CFPB, and state AGs continued to bring enforcement and provide guidance on perceived “dark patterns” – primarily related to automatic renewal and continuous service options, but also as to chat bots, disclosures, and marketing practices more broadly. In January, the CFPB released guidance focused on dark patterns in negative option marketing. In March, the NAD joined the discussion in a decision highlighting potential issues with Pier 1’s advertising of discounted pricing only available with a paid subscription and its use of a pre-checked box for enrollment with that same subscription. The FTC continued to lead the charge – with dark patterns allegations playing a key role in a number of enforcement actions, including against Publishers Clearing House, Amazon, and fintech provider Brigit.

• Beyoncé and Taylor Swift Concerts Lead to War on Junk Fees: Okay, the war against junk fees may have predated the fees associated with the pop stars’ mega tours, but it continued in earnest throughout the year. As with dark patterns, the FTC, CFPB and state AGs all took on junk fees at various times. Most notably, the FTC proposed a far-reaching rule that could fundamentally alter how prices and fees are disclosed in businesses across the country. The comment period was just extended until February 7, 2024 for the proposed rule. Not to be outdone, California passed new legislation banning hidden fees and the Massachusetts AG issued draft regulations that would prohibit hidden “junk fees,” enhance transparency in various transactions, and make it easy for consumers to cancel subscriptions.

• Endorsement Guides: In June, the FTC released its long-awaited update to the Endorsement Guides. We noted that the Guides include some significant changes, including new examples of what constitutes an “endorsement,” details about what constitutes a “clear and conspicuous” disclosure, and an increased focus on consumer ratings and reviews. We also examined how the revisions could affect influencer campaigns. In November, we reported that the FTC had sent warning letters to two trade associations and 12 influencers over their posts, giving us a glimpse of enforcement to come. Meanwhile, NAD has also been active in this space and even referred a case to FTC for enforcement. Expect this to be a priority for both FTC and NAD in 2024.

• Green Guides: The FTC’s Green Guides review progressed this year with an initial comment period closing in April, followed by an FTC workshop on “recyclable claims,” which we attended and highlighted here. With its history of hosting several workshops on hot green topics, we expect to hear of more workshops in the new year. California has been active as well with the governor signing a new law in October that aims to regulate carbon claims and make businesses more transparent about their carbon reduction efforts by requiring certain website disclosures (see our summary of the law here). The effective date is the first of the new year, but according to a recent letter from the bill’s sponsor, we expect that California will defer enforcement until January 1, 2025 to give companies time to comply (see here). With ESG efforts continuing to be front and center for most companies, consumers and regulators are holding companies accountable for those claims by questioning messaging about their efforts, aspirations for the future, and basis for the claims (see, for example, here, here, and here).

• State Privacy Laws: It’s getting increasingly hard to remember a time before state privacy laws regulated data sales, targeted advertising, sensitive data, and privacy disclosures. At the start of the year, five states had enacted privacy laws, and now there are 13 comprehensive consumer privacy laws (CA, CO, CT, DE, FL, IN, IA, MT, OR, TN, TX, UT & VA) and an additional two health-focused laws (WA, NV). What does this mean for advertisers? (1) Know who your vendors are and their data practices. (2) Obtain consent before building inferences based on sensitive data, like race/ethnicity, religion, or health. (3) Disclose up-front the collection, use, and disclosure of personal information. (4) Finally, recognize the limitations of third-party data as new regulations and laws take effect.

• Children’s Privacy: Congress, regulators, and advocates focused time and energy on children’s privacy issues in 2023. The House and Senate held hearings focused on children’s safety and privacy. Although the Senate Commerce Committee advanced the Kids Online Safety Act, it never received a floor vote; Senators Markey and Cassidy continued to advocate for approval of the Children and Teens’ Online Privacy Protection Act (COPPA 2.0). The FTC reached settlements with companies about practices it alleged violated the Children’s Online Privacy Protection Act (COPPA) on the Xbox and Alexa platforms and with edtech provider, Edmondo. In September, the FTC released a ​“Staff Perspective” on digital advertising to children, which included recommendations on how to protect kids from the harms of “stealth advertising.” Also in September, a federal court agreed with industry advocates that California’s Age Appropriate Design Act, which imposes a variety of obligations on businesses that provide online services “likely to be accessed by children,” violated the First Amendment. California is appealing the decision, and regulators, including a number of Attorneys General and FTC Commissioner Alvaro Bedoya, have joined the state as amici. One of the most anticipated developments occurred with just 11 days left in the year, when the FTC proposed revisions to the COPPA Rule—more than four years after initiating its review process. Among other things, the proposed Rule would require new, additional consents for third-party disclosures and could affect operators’ approach to “internal operations.” Online services with children’s audiences have lots to consider in 2024 and beyond. Stay tuned for further updates.

• State AG: State Attorneys General continued to make their presence felt in 2023. State AGs continued to go after companies for using fake reviews and false endorsements, enforced and proposed new price gouging rules, pursued telehealth companies for deceptive practices, supported the FTC’s Negative Option Rulemaking while bringing their own auto-renewal actions, continued to impose significant penalties against companies for data breaches, pursued companies for misleading consumer financial practices, and focused efforts on so-called “junk fees.” But two topics continue to be the highest priority of AGs – the impact of developments in AI (which we’ve written about here, here, and here – just to name a few) and protecting the most vulnerable consumers – especially our nation’s youth. The incoming president of the National Association of Attorneys General president, Oregon Attorney General Ellen Rosenblum, has already made protecting youth, especially teens, this year’s presidential initiative. Look for AGs to continue to this focus well into 2024.

• Automatic Renewal: While auto-renewal service sign-up flows remain important, this year, we have seen a transition to cancellation processes being the hottest topic as states enforce their specific requirements and the FTC has drawn attention to “click to cancel” through its proposed rule. But we shouldn’t forget all of the FTC’s other proposals under the negative option rule NPRM, including expanding the scope, requiring more specific disclosures, separate consent for negative option, consent for save offers, and expanded notice requirements. Regardless of whether a federal rule formally comes into play in 2024, as referenced above certainly states have agreed are on board with FTC’s proposals, and they also resolved a multistate investigation this year requiring checkbox consent, online cancellation, and limiting save attempts. And don’t forget Massachusetts is working on its own rulemaking involving online cancellation.

• NAD: This year, NAD issued number of decisions that caught our attention. For example, a decision in February narrows the scope of what claims may be considered puffery. NAD later elaborated on what it thinks advertisers must do in order to substantiate aspirational claims about future goals. NAD also issued a number of decisions involving endorsements – including employee endorsements and disclosure requirements – and even referred a case to FTC for enforcement. In August, NAD held that emojis could convey claims, though NARB later disagreed with how NAD had applied that principle. As always, NAD plays a big role in the advertising law landscape, so companies will want to continue to watch what NAD does in 2024.

• Same Product/Different Label Litigation: We chronicled a Connecticut district court’s denial of a motion to dismiss in a case in which the plaintiff alleged that Beiersdorf, maker of Coppertone sunscreens, engaged in false advertising by selling the same sunscreen formula in two different packages, one of which was labeled as “FACE” and sold in a smaller tube at twice the price of the regular Coppertone Sport Mineral sunscreen. That case is one to watch but it is not the only one of its kind. In fact, 2023 saw several similar cases involving allegedly the same formula marketed as different products with varying price points, such that the plaintiffs alleged that they were misled into purchasing the more expensive item because they believed it was uniquely suited to their needs when, in fact, it was the same as the lower-priced item. These cases involved a range of products, such as baby/adult lotions, infant/children’s acetaminophen, children’s/adult cold remedies, to name a few. So far, decisions are mixed, with some courts being more willing than others to find that the differing prices were justified. Marketers of food and personal care brands that merchandise the same formula in varying iterations will want to remain mindful of these cases as they update packaging and claims.

Keep following us in 2024, and we’ll keep you posted on how these trends develop. In the meantime, have a great holiday!

Six months after that dismissal, the same law firm that filed the first class action filed a second class action against H&M over the same line of clothing. This time, the firm focuses on a different angle, arguing that “H&M falsely and misleadingly markets the Products as made with ‘recycled’ and/or ‘organic’ materials.” The complaint alleges that, in reality, the products “are all made with virgin synthetic, conventionally grown, and/or non-organic materials.”

The plaintiff bases these allegations, in part, on information that appears in a “Materials & Suppliers” tab for each product on the website and in the H&M app. Examples in the complaint show the tab for some of the products in the collection states that the products are made with “cotton” or “polyester,” rather than with “recycled” or “organic” versions of those materials. The plaintiff also claims to have independent testing on a sample of those products to confirm that they aren’t recycled or organic.

The complaint was just filed and H&M hasn’t answered. Having only have one side of the story, it’s too early to predict how this will end. What we can predict, though, is that these types of lawsuits are likely to continue. Stay tuned for more updates. In the meantime, if your company makes any “green” claims, make sure that you have adequate substantiation and that you accurately describe the composition of all products.

The class action complaint focused on two types of practices:

• False Sense of Urgency: The plaintiffs alleged that SelectBlinds used countdown timers and other tactics to suggest that sales were about to end. When the timers hit zero, though, the retailer would launch a new sale “with a different name but a comparable discount, with an updated timer stating that the sale would expire at midnight the next day.” Allegedly, that cycle continued for over a year.

• Misleading Regular Prices Discounts: The plaintiffs alleged that SelectBlinds often advertised a “regular” price with a strikethrough, followed by the sale price. The retailer also often advertised the percentage of the discount comparing the sale price to the regular price. According to the plaintiffs though, SelectBlinds rarely sold the items at the regular prices – they were almost always on sale.

It’s likely that these types of lawsuits will continue, so retailers need to pay close attention to these cases and to pricing laws, particularly when they advertise discounts, sales, or other price reductions.

In a recent proposed class action, Brendan Abbott alleged that Golden Grain Co. misled customers into thinking they were getting more of the manufacturer’s rice pilaf mixture than the box actually contained, and that Abbot was “disappointed” when he opened the box and found it was no more than one-third full. The Eastern District of Missouri dismissed Abbott’s claims with prejudice, finding that Abbott got exactly what he bargained for: “Golden Grain’s boxes say that they contain 6.09 ounces of rice pilaf, and Abbott does not allege that they contain, or that he received, anything less than 6.09 ounces of rice pilaf.”

Notably, the Court held that Abbott’s “subjective, package-disclosure-defying expectations” of the box’s contents would not be shared by other reasonable consumers, something that Abbot was required to allege pursuant to recent amendments to the Missouri Merchandising Practice Act. Rather, the Court ruled that reasonable consumers would understand that the box contained 6.09 ounces of rice pilaf simply by “reading the package.” Indeed, not only did the package accurately disclose its weight and specifically advise consumers that the product was sold by weight and not by volume, Golden Grain went so far as to include a “fill line” on the side of the box, demonstrating exactly how much grain was in the package. Under these circumstances, the Court found that “[w]hether his disappointment was feigned for the purpose of propagating litigation or real, Abbott got what he bargained for and fail[ed] to plausibly allege an ascertainable loss.”

Abbott’s reference to FDA nonfunctional slack fill regulations (a common practice in class action complaints these days) was similarly unpersuasive because the complaint did “not explain how FDA regulations can set the standard for what a state legislature deems misleading, and necessary to state a cause of action, under a state consumer-protection law.”

This case serves as a noteworthy example of judges’ growing frustration with class actions premised on irrational and unreasonable interpretations of product labels and packages. In this instance, a single grain of rice pilaf (or rather, 6.09 ounces thereof) was just enough to tip the scales of justice.

The complaint alleges that there are various “foundational issues with the voluntary carbon offset market” that render “carbon-neutral” claims based on offsets inherently problematic, even those that have been verified by an independent third party. Relying largely on various articles that criticize offsets, the plaintiff focuses on four main themes:

• Accounting Issues: The complaint alleges that the voluntary carbon market has a “tendency to inflate” carbon impacts, resulting “in phantom carbon credits.” More specifically, the plaintiffs complain that major voluntary carbon markets often use “inaccurate projections” and that they “have engaged in fraudulently double and triple counting of projects.”

• Non-Additional Offsets: The complaint alleges that the major voluntary carbon markets often provide credit “for reductions that would have occurred regardless of the involvement of the voluntary carbon market.” The plaintiffs argue that “any claim of carbon neutrality that is even fractionally predicated on non-additional carbon projects is definitively false.”

• Timing of Offsets: The complaint alleges that any benefits from offsets may not be realized until far into the future. For example, although a flight today will “dump carbon dioxide into the atmosphere right now, … saplings planted today won’t grow large enough to offset today’s emissions for decades.” Thus, Delta’s claims that it was carbon neutral in a calendar year are false.

• Impermanent Offsets: The complaint argues that because CO2 emissions “stay in the atmosphere for a century or more,” a company “must offset an equivalent amount of emissions for at least that long.” However, many offset projects may not last that long. For example, the plaintiffs allege that some forests associated with carbon crediting projects have already been destroyed by fires.

Although some of what the plaintiffs would seem to require of companies – such as accurate accounting to ensure that emission reductions are measured properly and not sold more than once – is consistent with the FTC’s Green Guides, other things arguably go beyond what the FTC requires. For example, the Green Guides don’t require that reductions happen immediately. Instead, they state that marketers should disclose if emission reductions won’t occur for at least two years.

The lawsuit was just filed and Delta hasn’t answered yet, so it’s too early to predict how this case will turn out. We’ll be watching this case closely, though, because the decision could have a significant impact on any company that makes claims based on the purchase of carbon offsets. Stay tuned for updates.

Lizama argued that H&M misled consumers into thinking that its Conscious Choice collection was “environmentally friendly.” (By our count, that phrase appears more than 100 times in the complaint.) The court pointed out, though, that H&M never actually uses that phrase to describe its garments. Moreover, H&M does not represent that its Conscious Choice products are “sustainable” – only that the line includes “more sustainable materials” and its “most sustainable products,” which the court said are obvious comparisons to H&M’s regular materials.

Lizama argued that the garments were not sustainable because recycling PET plastics into clothing isn’t as good for the environment as recycling those plastics into plastic bottles. Even if that’s the case, the court noted that the comparison wasn’t relevant in determining whether H&M’s claims were misleading. “Instead, the relevant comparison is whether one garment using recycled polyester is more sustainable than another garment using non-recycled (also known as virgin) polyester.”

The court noted that H&M provided “copious amounts of information” about its comparisons on its website (which Lizama admittedly reviewed). “H&M disclosed on its website all of the information Lizama needed to determine the source, composition, and relevant comparison of the ‘more sustainable materials’ used by H&M in its Conscious Choice collection. For this reason, Lizama’s claims that he was misled into believing something that was never represented by H&M must fail.”

The court also rejected Lizama’s contention that H&M’s claims are “unqualified general environmental benefit claims” as defined by the FTC’s Green Guides. Indeed, the court said the sustainability claims were clearly qualified by “explaining that its conscious choice items are made with ‘a little extra consideration for the planet’ because they use ‘more sustainable materials’ than its regular collection.” The court also dismissed Lizama’s argument that the messaging overstated the environmental benefit since the products in the conscious choice category included only those with the majority of their materials being ‘more sustainable’ than the regular collection.

There’s a lot more going on in this case, and the decision may be worth a read for retailers making similar claims, but there is at least one important takeaway in this case. Plaintiffs will continue to file lawsuits when their ideas about what is “sustainable” or good for the environment differs from a company’s ideas about those concepts. Companies will fare better in those lawsuits if they are able to provide detailed and accurate information to explain their claims and have substantiation that the touted attributes actually result in an overall benefit for the environment.

For more information on these topics and the increase in legal risks associated with ESG messaging, please join our Hot Topics in Green Marketing webinar on May 31, 2023.

Aside from regulators, however, Plaintiffs’ lawyers also are paying attention to the FTC’s activity of law, and, on a parallel track, has initiated a wave of consumer class actions regarding the use of tracking pixels and consumers’ “health information” have followed. We anticipate this wave will only increase in response to Washington’s My Health, My Data Act once in effect.

The Trend: More than 50 class actions have been filed across the country in recent months, all of which rely upon similar factual allegations.

These recent lawsuits assert similar claims to ones brought by the FTC, and allege that companies in the healthcare sector (and beyond) are using advertising pixels on their websites and patient portals to harvest user data, including medical information from users accessing the relevant sites for a medical purpose. These actions claim that these companies then transmit that information to third parties, such as social media platforms, to target advertising for that user, who then begins to receive targeted advertising related to her particular medical condition.

The Legal Theory: While these lawsuits all rely upon a similar factual predicate, plaintiffs have been relying upon a variety of legal theories to seek relief including:

• State specific privacy and consumer protection statutes across the country, such as the California Invasion of Privacy Act (“CIPA”), as well as other similar statutes in Illinois, Wisconsin, Pennsylvania, and Florida,
• Federal privacy law statutes, such as the Federal Wiretap Act Stored Communications Act, the Video Privacy Protection Act, and the Electronic Communications Privacy Act (“ECPA”), and
• Common law claims such as negligent misrepresentation, negligence, breach of confidence, breach of contract, breach of warranties, invasion of privacy, intrusion upon seclusion, unjust enrichment, and breach of fiduciary duty.

Cases to Watch: As we monitor this developing trend, below are examples of the cases we are watching most closely:

• In In Re Meta Pixel Healthcare Litigation, plaintiffs filed suit against Meta inthe Northern District of California, asserting claims under the federal Wiretap Act, CIPA, in addition to common law claims. The plaintiffs sought a preliminary injunction to require Meta to immediately cease the collection, dissemination, and retention of patient information acquired by the Meta Pixel on hospital webpages. The court ultimately denied the injunction request because Meta was able to show that it had systems in place to detect and filter potentially sensitive information transmitted by the Pixel that were sufficient to warrant denial of the injunction request at the early stage of the proceedings. The court, however, indicated it would revisit the issue following discovery. The court also concluded that: (i) Meta Pixel does, in fact, track patient status, and (ii) patient status is considered Protected Health Information under the Health Insurance Portability and Accountability Act (“HIPAA”). The court also rejected, for purposes of the preliminary injunction phase, Meta’s argument that consumers consent to the sharing of their information through the Pixel through its privacy policy. The case is now continuing beyond the preliminary injunction context.
• In Wilson v. GoodRX Holdings, Inc., Criteo Corp., Meta Platforms, Inc., and Google LLC, plaintiffs filed suit against a number of defendants in the Northern District of California asserting claims under CIPA, the California Confidentiality of Medical Information Act (“CMIA”), California Consumers Legal Remedies Act (“CLRA”), Unfair Competition Law (“UCL”), and common law invasion of privacy claims. These cases were consolidated on May 3, 2023. While this case is still in early stages, there is suggestion that certain defendants may move to compel arbitration. The deadline for GoodRX to file motion to compel arbitration is June 9, 2023.
• In another Northern District of California case, plaintiffs in Doe v. Hey Favor, FullStory, Meta Platforms, TikTok and Bytedonel filed suit regarding sensitive health information provided to Favor, which provides at-home delivery of birth control products. Plaintiffs allege that this information was allegedly sent to Meta and TikTok and have asserted common law invasion of privacy claims, as well as claims under CMIA and CIPA. This litigation also remains in the early stages, pending a motion by Meta to sever claims against it and consolidate with In re Meta Pixel Healthcare Litigation cases.

What’s Next: As companies assess new privacy risks associated with their advertising practices, it’s clear that the use of consumer information related to health for advertising purposes is not only on the agenda for the FTC and legislators, but also on the radar of the plaintiffs’ bar.

Companies offering health and wellness-related products or services would be wise to evaluate their adtech practices and consider whether:

• Their privacy policies clearly state the type of information that is collected, with whom it can be shared. If your company also chooses to provide a cookie banner, evaluate whether it is appropriate to update the banner disclosure and type of permissions you are seeking in light of the data being shared and business practices at issue in the litigation wave.
• Any of the information collected and processed may qualify as health information at issue in these cases, even if hashed.
  • If so, evaluate your disclosures and permission settings along with a risk analysis with your legal counsel.
• You have a process in place that identifies, at a granular level, what information you are sharing with third parties through pixels or otherwise.
  • You may need to update current training to advertising team and review and update current processes when engaging with adtech and how it is applied to your digital properties.
• Your business is in the “hot zone” of federal scrutiny (or adjacent), or whether any of your partners are.
  • Review contract terms to make sure you have the strongest possible protection.
• You can implement a risk plan (immediate and longer-term) to address the current legal developments and the new laws that are coming, and re-assess at a reasonable cadence given how quickly this landscape is shifting.

If you’d like an overview of this subject, you can also Click here for a recording of our recent webinar titled, “Privacy, Health and Pixels – What You Need to Know Now.” If you have questions about your privacy practices, or this litigation trend, feel free to reach out to discuss.

In 2020, online retailer Boohoo – whose brands include PrettyLittleThing, NastyGal, and boohooMAN – was hit with a lawsuit alleging that it frequently ran misleading sales. For example, had you been in the market for a pair of pink peach skin pocket flared pants at this time two year ago, you might have been excited to find this pair for $14, which is 67% off the crossed-out price of $42:

California law generally prohibits a company from advertising a “former price,” unless that price was the prevailing market price within a three-month period preceding the ad. According to the plaintiffs, though, the retailer had not sold items at the advertised crossed-out price during that three-month period. Instead, the crossed-out price was allegedly made up to create the illusion of a discount.

As part of the settlement, each class member will receive a gift card to use toward the purchase of any item on the site from which they’d originally made a purchase. In addition, the retailer agreed to conspicuously disclose that the “original” price advertised on a product page is not intended to indicate a former price. The required disclosure reads:

Our percentage off promotions, discounts, or sale markdowns are customarily based on our own opinion of the value of this product, which is not intended to reflect a former price at which this product has sold in the recent past. This amount represents our opinion of the full retail value of this product today based on our own assessment after considering a number of factors.

It’s likely that these types of lawsuits will continue, so retailers need to pay close attention to these cases and to pricing laws, particularly when they advertise discounts, sales, or other price reductions. Everyone likes a sale (and some people like pink peach skin pocket flared pants), but if you aren’t careful about how you structure your sales, your company could end up paying a high price in the end.

• Some emails advertised that products were on sale “today only” or “this week only.” The next day (or the next week), however, the plaintiffs received emails advertising the same sale.

• Some emails advertised that consumers had one “last chance” to take advantage of a discount. The next day, however, the plaintiffs received emails advertising the same discount.

• Some emails advertised a sale with a fixed deadline. The next day, however, the plaintiffs received emails stating that the sale had been “extended.”

Moreover, some of those emails include images of ticking clocks and language urging consumers to “hurry” or “open quickly.” The complaint alleges that these tactics create a false sense of urgency by suggesting that consumers had to act quickly to take advantage of a sale, when that wasn’t true.

Exhibits to the complaint include examples of 51 emails received by one plaintiff and 40 received by the other, along with explanations of why the plaintiffs think the subject lines are false and examples of other emails that allegedly contradict claims in the challenged emails.

The plaintiffs argue that Old Navy’s tactics violate Washington’s Consumer Protection Act and Commercial Electronic Mail Act (which has a limited private right of action), and they are seeking $500 in statutory damages per each email that violates the latter.

As we wait to see how this case develops, companies should ensure that they don’t misrepresent their promotional offers. Creating a sense of urgency can be an effective (and lawful) marketing technique as long as all claims are accurate. But a false sense of urgency will annoy consumers, lead to lawsuits, and generate unwanted attention from regulators.

Last week, consumers filed a class action against Safeway and its parent company alleging that the grocer unlawfully inflates the regular retail price of products used in buy-one-get-one-free promotions, causing consumers to effectively still pay for the “seemingly” free product. For example, the complaint alleges that Safeway sold a product for $7.47 one day and for $10.99 the next day, as part of a BOGO offer.

The complaint cites the FTC’s guides on using the word “free” – which state that a consumer “has a right to believe that the merchant will not directly and immediately recover, in whole or in part, the cost of the free merchandise … by marking up the price of the article which must be purchased” – and argues that the guides should be persuasive in determining whether a practice violates state law.

It’s too early to tell how this case will turn out or how the FTC’s guides, which were adopted in 1971, will apply today in a context in which some retailers adjust their prices frequently. It’s likely that these types of suits will continue as bargain conscious consumers look for sales, though. We’ll keep our eyes open for updates. In the meantime, you can click here for more developments on pricing and sale practices.

• monitor the fairness of the action as intended by CAFA, and
• protect the states’ own interests, whether related to active investigations or potential future ones.

Since 2014, states have had to contend with the holding of California v. Intelligender in the 9^th Circuit, which found that the state was precluded from obtaining restitution after the class action obtained monetary relief. Though this holding could potentially be limited due to the specific facts of the case, states are taking this potential outcome seriously as demonstrated by New Mexico’s recent attempt to intervene in the In re: Facebook, Inc. class action last month.

The court denied New Mexico’s motion to intervene, however, stating:

It should be obvious to the New Mexico Attorney General that a private class action settlement cannot prevent a state from pursuing a lawsuit against the defendant based on the same conduct to vindicate its police powers (for example, to impose penalties or obtain junctive relief). But it should be equally obvious that Facebook could argue that New Mexico is barred from obtaining a financial recovery on behalf of residents who participated in this class action settlement.

The court goes on to say that New Mexico should have raised their argument longer ago, and that their concern of not being able to seek restitution for consumers is unfounded because the states likely cannot recover a larger amount for their residents. In an abundance of caution however, the court allowed for an additional comment period for interested states to file an objection or request changes to the class action notice. Ultimately, no states commented. The court preliminarily approved the settlement last week, again referencing that New Mexico’s concerns that states may not be able to later recover restitution “do not provide a basis for rejecting the settlement.”

So, remember:

• While a prior class action settlement may prevent “double recovery” of restitution from a State AG enforcement action, courts say a private settlement may NOT prevent a State AG from obtaining penalties and injunctive relief on the same conduct.
• States watch class action settlements and weigh in usually through amicus briefs with mixed results. But courts are typically willing to at least listen to what states have to say.

(Why she had to go? I don’t know, she wouldn’t say. But Richard Curtis explains it here.)

Is that really something worth filing a lawsuit over? Yes, say the plaintiffs. According to the complaint: “Because consumers were promised a movie with Ana De Armas by the trailer for Yesterday, but did not receive a movie with any appearance of Ana de Armas at all, such consumers were not provided with any value for their rental or purchase.”

That’s harsh. The 64% fresh rating on Rotten Tomatoes suggests that surely there is some value to be had in watching the movie, but no matter. These plaintiffs wanted to see Ana de Armas in the movie, they didn’t, and now they want to see Universal pay them and their fellow fans $5 million for getting their hopes up and then letting them down.

Universal argued that, as a creative work, a trailer is entitled to broad First Amendment protection. A California federal court found, however, that creativity doesn’t outweigh the commercial nature of a trailer. “At its core, a trailer is an advertisement designed to sell a movie by providing consumers with a preview of the movie.” Accordingly, the trailer is subject to false advertising laws.

The court dismissed Universal’s concerns that ruling against them could open the floodgates to similar suits from other plaintiffs over their subjective expectations. The court noted that false advertising laws apply only when a “significant portion” of “reasonable consumers” could be misled and that its holding “is limited to representations as to whether an actress or scene is in the movie, and nothing else.”

Despite the unusual facts and the narrow holding, this case holds some broader lessons. Advertisers need to be careful to ensure their ads don’t set unrealistic expectations about how a product or service will perform or what’s included. And consumers need to check IMDB before renting a movie if their sole reason for doing so hinges on the appearance of one person.

On October 6, 2022, Sean Burke and a purported class of consumers filed a lawsuit against Tribucha, Inc. in the U.S. District Court for the Eastern District of North Carolina, alleging that Tribucha Kombucha (“Tribucha”) was deceptively advertised as non-alcoholic because it contained more than 0.5% alcohol by volume and failed to comply with labeling requirements for alcoholic beverages.

Plaintiffs allegedly purchased Tribucha at local retailers in their respective states, “with the belief and on the basis that” Tribucha was not alcoholic, based on label statements, store placement, and other factors. Based on lab tests allegedly showing that the Tribucha beverages contained more than 0.5% alcohol by volume, plaintiffs assert claims for violations of state consumer fraud acts, breach of implied and express warranties, fraud, unjust enrichment, and violations of federal and state labeling laws.

Why does this matter?

Regardless of whatever merit there may or may not be to the allegations, the Burke case illustrates how tricky the jurisdictional lines and labeling requirements for low and no-alcohol products can be and how important it is that manufacturers understand compliance before bringing a product to market. Here are some guidelines and resources for navigating this space:

• Kombucha that is at or above 0.5% alcohol by volume at any time is subject to TTB regulation. By contrast, kombucha that is never at or above 0.5% alcohol by volume is subject to FDA’s regulations, but not TTB. State and local requirements may also apply.
• TTB regulates wine with 7% or more alcohol by volume, malt beverages, sake, and spirits. State and local requirements may also apply.
• FDA regulates a range of de-alcoholized wine and wine with less than 7% alcohol by volume along with certain beers. This is why many new entrants to the low and no-alcohol category feature nutrition facts panels and other familiar food labeling elements, along with disclosures regarding alcohol content and a surgeon general’s warning. And, of course, state and local rules may also apply.

* * * *

The plaintiff alleges that when he learned that his Game Pass subscription was going to be converted to an NFL + subscription, he attempted to cancel. He found the cancellation instructions to be unclear and unintuitive, and he was charged a fee, even after he thought he had cancelled. His attempts to resolve the problem by talking to chatbots and live representatives were frustrating and didn’t help. The complaint then makes some interesting guesses about what happened behind the scenes.

The plaintiff alleges that the NFL has “a scientifically designed process” to reduce “churn,” and that the process has “been developed and tested by experts in behavioral science and psychology and include interrelated manipulative design tactics referred to as ‘dark patterns.’” As a result, he alleged that the NFL “can scientifically ensure that no more than a fixed percentage of users will successfully navigate the gauntlet of obstacles laid down in front of them if they decide to cancel.”

The plaintiff’s attorney added a little more color to his theories when he told Law360 that the NFL had a practice of “trapping [consumers] in a Rube Goldberg machine combining elements of whack-a-mole and one of those mazes with the mirrors where you can’t get out.” (If any of our readers would like to share their ideas of what such a machine would look like, please send us your sketches, and we’ll add the winning designs to this post.)

It’s too early to predict how this case will turn out, whether consumers will escape the maze-like machine, or whether any moles will get whacked. But it is easy to predict that these types of cases will continue. If you offer automatically renewing subscriptions, you should obviously make sure you comply with relevant laws. Beyond technical compliance, though, you should take a look at your user interface to make sure it’s intuitive for consumers. And you should monitor complaints, which could provide hints of problems.

Specifically, the complaint alleges that the company violated Oregon’s automatic renewal law by:

• failing to present the automatic renewal offer terms in a clear and conspicuous manner and in visual proximity to the request for consent;
• charging consumers without first obtaining their affirmative consent; and
• failing to provide an acknowledgment that includes the offer terms, cancellation policy, and information on how to cancel in a manner that can be retained by the consumer.

We expect that suits involving automatic renewals are likely to increase, so if you offer subscription services, you should take steps to assess your level of compliance. Even if you don’t offer subscriptions, it’s worth noting how the allegations in this suit fits into some of the broader trends we’ve written about recently.

For example, the complaint accuses YouTube of using “dark patterns,” a topic that is receiving increased attention from federal and state regulators. And it questions the effectiveness of the company’s disclosures, a topic about which the FTC intends to issue new guidelines.